By NAB’s Phin Zeibell
Agriculture continues to kick goals in the Goulburn Valley, with a wet season and good prices giving producers some of the best returns in years. While prices look to have peaked for now – albeit from record levels – we remain confident that northern Victoria will enjoy another strong year.
Business inflows for NAB agriculture, forestry and fishing customers continue to grow at a rapid pace, reflecting a monster winter crop, strong commodity prices and more recently, a record-breaking cotton bonanza. Our 6-week rolling average closed out July up 27 percent compared to a year prior.
However, the year has not been without challenges. Input costs, particularly fuel and fertiliser, combined with patchy labour availability, has kept business on its toes. While there are some signs input costs are peaking, gas remains a key risk.
Global economic headwinds continue to mount, driven by high inflation, particularly for energy. This has seen central banks raise official interest rates at a rapid pace. The RBA has hiked rates to 2.35 percent, from a record low of 0.1 percent at the start of the year. We see the cash rate reaching around 2.85 percent by year end. We still see a soft landing for the Australian economy (unlike Europe for example, which will face major energy challenges this northern winter), but growth is likely to be slower in 2023.
But for regional economies across northern Victoria, elevated regional migration inflows, combined with another good year for agriculture, should see 2022 close out as a strong year.
